As I've mentioned here previously, PFF has been rolling out a new series of essays examining proposals that would have the government play a greater role in sustaining struggling media enterprises, "saving journalism," or promoting more "public interest" content. We're releasing these as we get ready to submit a big filing in the FCC's "Future of Media" proceeding (deadline is May 7th). Here's a podcast Berin Szoka and I did providing an overview of the series and what the FCC is doing.

In the first installment of the series, Berin and I critiqued an old idea that's suddenly gained new currency: taxing media devices or distribution systems to fund media content. In the second installment, I took a hard look at proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a "public square channel" or some other type of public media or "public interest" content.

In our latest essay, "The Wrong Way to Reinvent Media, Part 3: Media Vouchers," Berin and I consider whether it is possible to steer citizens toward so-called "hard news" and get them to financially support it through the use of "news vouchers" or "public interest vouchers"? We argue that using the tax code to "nudge" people to support media -- while less problematic than direct subsidies for the press -- will likely raise serious issues regarding eligibility and be prone to political meddling. Moreover, it's unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

I've attached the entire essay down below.

The Wrong Way to Reinvent Media, Part 3: Media Vouchers

Should the government play a greater role in the media sector in the name of sustaining struggling media enterprises, "saving journalism," or promoting public media? In this ongoing series of essays, we've been analyzing proposals that would have public policymakers use taxes, subsidies, or regulations to accomplish those objectives.

Part 1 of this series examined proposals to fund media content via a tax on consumer electronics, broadband service, or cell phone bills.[1]Part 2 critiqued proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a "public square channel" or some other type of public media or "public interest" content.[2] Other essays in this series will address proposals to tax private advertising revenues to support public media; expand postal subsidies; directly subsidize out-of-work journalists; and to prop up or bail out failing media entities. A wrap-up essay will then focus on some potentially constructive policy reforms that could assist media enterprises without a massive infusion of state support or regulation of the press.

In this installment, we will consider whether it is possible to steer citizens toward so-called "hard news" ("serious" journalism)--and get them to financially support it--through the use of "news vouchers" or "public interest vouchers"? We will argue that using the tax code to nudge people to support media--while less problematic than direct subsidies for the press--will likely raise serious issues regarding eligibility and be prone to political meddling. Moreover, it's unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

Funding Hard News is Hard

Funding "hard news" has always been challenging. Financing a team of dedicated local beat reporters, investigative journalists, national desks, foreign bureaus, and all the associated production facilities and support staff is an extremely expensive undertaking.[3] And, for all that trouble and expense, hard news rarely turns a healthy profit. Often it has been considered a "loss leader" for media companies and has been cross-subsidized by other types of content or services.[4] This is why "bundling" has been such a popular model for many media operations such as newspapers, magazines, and cable television. By tying news production to other types of content or services, media operators have been able to sustain the production of hard news, despite its general unprofitability on its own.

It's worth recalling that a business model to sustain hard news production and dissemination on a mass scale really only developed mid-way through our Republic. The early history of media in this country was characterized by the "partisan press" due to the heavy reliance on a patronage model and direct association with political parties and figures. This changed with the rise of large daily newspapers in the mid-1800s and then broadcast radio and television in the early half of the 20th century.[5] Media providers were able to cross-subsidize news production independent of private or political patronage thanks to three things: (1) high-speed printing presses or broadcast facilities, (2) geographic-based market and pricing power, and (3) the widespread advertising base that was made possible by (1) and (2).

Over just the past 15-20 years, we've seen this traditional model upended. Increased competition and technological/platform proliferation are placing an enormous strain on traditional media operations and business models. Schumpeterian "creative destruction" is at work in a serious, and for many, painful, way.

This is what is keeping the Federal Communications Commission,[6] the Federal Trade Commission,[7] some in Congress,[8] and many media worrywarts up at night: the fear that, as traditional financing mechanisms falter (advertising, classifieds, subscription revenues, etc.), many traditional news-gathering efforts and institutions will disappear. And that's leading to calls for government intervention or assistance of some sort to prop up struggling entities or directly subsidize the hard news that many of them have traditionally provided but may not be able to for much for longer.

Can Vouchers "Nudge" Citizens to Support Hard News?

One much-discussed proposal would create a "public interest voucher" or what Robert W. McChesney & John Nichols, authors of the new book The Death and Life of American Journalism, call a "Citizenship News Voucher."[9] This is a variant on the "artistic freedom voucher," an idea first put forward in 2003 by economist Dean Baker as an alternative to copyright law as a means of incentivizing artistic creation.[10] The regulatory activist group Free Press, which McChesney founded, has also endorsed a news voucher scheme.[11]

The idea is fairly straightforward: give every American a voucher (McChesney and Nichols propose $200) to support the non-profit news entities of their choice by listing those entities on their tax return. (If half of all adult Americans actually used their voucher, that would cost at least $20 billion/year.[12]) They assume this would be an efficient way of channeling money to hard news providers while avoiding the serious concerns that arise when government officials or agencies are the ones providing or steering the subsidies. McChesney and Nichols go so far as to call their tax-and-redistribute proposal "a libertarian's dream," since "people can support whatever political viewpoint they prefer or do nothing at all."[13]

McChesney and Nichols seem to be building on the approach popularized by Richard Thaler and Cass Sunstein in their highly influential 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness.[14] Based on behavioral economics studies, Thaler and Sunstein argue that both government and private actors must inevitably make decisions about "choice architecture" and that, by setting defaults, incentives and rules smartly, "choice architects" can and should improve private decision-making--but only where they can do so without blocking, fencing-off or significantly burdening choices.[15] While their proposal might not qualify as a nudge in the strict sense defined by Thaler and Sunstein, the essential similarity between the concepts lies in trying to restructure the choices Americans make about media consumption by changing how they spend money on media--with the declared goal of "improving" both media consumption and the media itself (by "freeing it" of supposedly evil corporate influences).

Problems with the News Voucher Proposal

While nudges might be less objectionable in circumstances where it's objectively evident what's really "good" for us, the same can hardly be said for media consumption. "Nudging" consumers towards better media choices isn't based on clear science about, say, eating better or getting more exercise, but on highly subjective decisions about what kind of information consumption is really good for individuals, communities, and polities. For policymakers to imagine that they can steer the public's tastes or behavior in more desirable directions through law (including media subsidy schemes) is a profoundly elitist enterprise.[16] In the case of "news vouchers," the hope is that the public can be encouraged to at least channel some additional support to news-gathering activities and institutions. The problem, however, is that some people just don't much like being "nudged" by officials from afar and they'll often take steps to evade such paternalism--however ostensibly "libertarian" it might be. And it could lead to a host of unintended consequences, discussed further below.[17]

As a general matter, it simply isn't possible to make consumers choose the "right" media in an age of information abundance.[18] With so many voices competing for our attention, it's impossible make people watch, listen, or read if they don't want to. That's especially true with hard news, which has never netted major ratings. As Ellen P. Goodman of the Rutgers-Camden School of Law has noted: "Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy. Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure."[19] As Goodman rightly argues, "regulation cannot, in a liberal democracy, force viewers to consume media products they do not think they want in the name of the public interest."[20] There's no reason to believe this situation has ever been different or will ever change: Writing in 1922, famed journalist Walter Lippmann noted that, "it is possible to make a rough estimate only of the amount of attention people give each day to informing themselves about public affairs," but "the time each day is small when any of us is directly exposed to information from our unseen environment."[21]

McChesney and Nichols' effort to sell this scheme as "a libertarian's dream" is a huge stretch. There aren't too many libertarians--or anyone else for that matter--who favor sending more money to the federal government only to win back the right to spend it on "qualifying media entities." And regarding their claim that "people can support whatever political viewpoint they prefer or do nothing at all," well, people are already free to do whatever they want with their money when it comes to media products! Why do we need to send money to Washington first and then have policymakers tell us how we can spend it? This seems like a needless nudge--and one that would likely result in government bureaucracy taking a cut of the money or meddling in media markets.

Analogies to educational vouchers don't work because we long ago decided to treat education as a public good and force everyone to pay for it. "Voucherization" may make sense as a more efficient and "libertarian" way to fund such traditional public goods, when we absolutely have to force people to spend money on certain goods or services. While McChesney and Nichols claim that the time has come for the government to fund media as such a public good, most people probably wouldn't agree, since the private provision of media services has worked quite well for some time--being funded by a mix of advertising and subscription revenues for centuries. They repeatedly claim that era is over (with little substantiation) but, in reality, it is their policies that would end private, for-profit media by taxing and regulating it to death.[22]

Second, what counts as a "qualifying media entity," and how will the IRS make that call? Can just any outlet that purports to gather and report "news" draw support from this new federal program? McChesney and Nichols aren't clear: They want the IRS to "determine eligibility--according to universal standards that err on the side of expanding rather than constraining the number of serious sources covering and commenting on issues of the day."[23] They specify only that the entity must be a non-profit (though not necessarily a federally-recognized 501(c)(3)); not accept advertising; "do exclusively media content"; "cannot be part of a larger organization or have any non-media operations"; and that everything the medium produces must be made available immediately upon publication on the Internet and made available for free to all."[24] But, anticipating objections about the dangers of political meddling, they also insist that "the government will not evaluate the content to see that the money is going toward journalism. Our assumption is that these criteria will effectively produce that result, and if there is some slippage so be it."[25] The only mechanism they can suggest for reducing fraud and ensuring "seriousness" is that, "for a medium to receive funds it would have to get commitments for at least $20,000 worth of vouchers" (100 full donations of the $200 voucher).[26]

But will policymakers really let citizens redeem their vouchers on The National Inquirer or People magazine? How about the satirical The Onion or Jon Stewart's Daily Show? "This is a risk we are more than willing to take," McChesney and Nichols say since they are "operating on a gut instinct that people will use their vouchers to fund serious media while reaching into their pockets to pay for copies of The National Inquirer at the supermarket checkout."[27] Of course, it's always easier to take such risks when you are playing with other people's money! (Nearly half of all Americans don't pay any Federal income taxes,[28] so their $200 news voucher is definitely coming out of someone else's tax bill.)

But it's naïve to believe this idea is going to change the face of journalism in any serious way. Most people will spend their vouchers on whatever media outlets and content they are currently consuming, which probably isn't what McChesney and Nichols (or most policymakers) would prefer. "The program may not develop exactly the type of journalism our greatest thinkers believe is necessary," McChesney and Nichols admit.[29] But the real question is: What sort of demands will policymakers begin making if the voucher program ends up channeling money into media entities that don't measure up to their standards or desires? Qualification criteria would inevitably become the tool of political meddling.

The Inevitable Strings & the Political/Constitutional Paradox

This raises a fourth concern: How long will it be before government starts attaching more strings to the vouchers? To borrow a recent headline from The Wall Street Journal, how long will it be before the "Economic Policy 'Nudge' Gives Way to a Shove?"[30] Although, in theory, the news voucher idea lets consumers figure out how to steer the funds, it's unlikely much of those funds would go toward hard news, civic-minded or "high brow" content if consumers were actually free to choose. How do we know this? Because we already know what consumers choose today--and those "poor" choices are part of the supposed "problem" to be solved by media vouchers. Once people start redirecting taxpayer dollars to content that the elites and policymakers don't like, the nudge will become a shove and more interventions will follow in the form of "voucher guidance and compliance" hearings, rules, etc.

But the pressure for strings won't just come from the top down because, as Thomas Jefferson famously put it in the 1786 Virginia Act for Establishing Religious Freedom, "to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves, is sinful and tyrannical."[31] That is, we naturally--and rightly--resent subsidizing speech that is antithetical to our own values. McChesney and Nichols dismiss this natural (presumably bourgeois?) indignation by saying, "people will have to accept that some of the vouchers are going to go to media that they detest."[32] In one sense, they are dead wrong: People won't just accept that. They may accept subtle, indirect subsidies, but the more clear it becomes that they are being forced to pay for media they detest--and that could scarcely be more clear than with a refundable tax credit "voucher"--they will protest and demand that certain viewpoints, or at least kinds of content, be deemed out of bounds.

But in another sense, McChesney and Nichols are probably correct: For such a scheme to work, it probably can't come with any content strings, because this is probably what the First Amendment would require. Yet they don't actually explain that point, stopping only to say that we all just have to become more tolerant of "dissent"--i.e., subsidize those who disagree with us! In this sense, news vouchers therefore would likely fall prey to a common paradox faced by proposals for the government to subsidize speech: What's politically feasible is unconstitutional and what's constitutional is politically impossible. Specifically, the kinds of eligibility restrictions necessary to push a voucher scheme through Congress would probably cause the courts to strike down the whole scheme. Even if the courts were willing to strike down only the eligibility provisions as "severable" from the rest of the scheme, the whole scheme would likely die in the very next federal budget if the courts require the funding of "offensive" or "frivolous" content. Understanding why this is the case requires a brief overview of key First Amendment case law.

In general, "when the Government appropriates public funds to establish a program it is entitled to define the limits of that program."[33] Thus, in its 1991 Rust v. Sullivan decision, the Supreme Court upheld a law forbidding federal funding for family planning services to go to abortion counseling.[34] But the Supreme Court later clarified that such viewpoint discrimination is permissible only "[w]hen the government disburses public funds to private entities to convey a governmental message."[35] By contrast, where subsidies are "designed to facilitate private speech," government may not discriminate against viewpoints it does not like.[36] Thus, the government may not fund legal services but bar funding for defendants trying to amend or otherwise challenge existing welfare law.[37]

The First Amendment prohibits not only such viewpoint discrimination but content discrimination as well. In 2003, the Supreme Court held that the University of Virginia could not exclude religious groups from drawing on the University's Student Activity Fund, even though the Fund's eligibility requirements did not discriminate against any particular religion.[38] Yet in 1995, the Court had upheld another content restriction: a requirement that the National Endowment for the Arts (NEA) "take into consideration general standards of decency and respect for the diverse beliefs and values of the American public" when making grants to "help create and sustain not only a climate encouraging freedom of thought, imagination, and inquiry but also the material conditions facilitating the release of . . . creative talent."[39] The Court concluded, in an 8-1 majority, that the "'decency and respect' criteria do not silence speakers by expressly threaten[ing] censorship of ideas."[40] This decision rested largely on the fact that "Educational programs are central to the NEA's mission" and "it is well established that 'decency' is a permissible factor where 'educational suitability' motivates its consideration."[41] The Court left the door open to future First Amendment challenges to the statute "as applied," such as "[i]f the NEA were to leverage its power to award subsidies on the basis of subjective criteria into a penalty on disfavored viewpoints."[42]

What explains these starkly different outcomes is that the Court decided that the University of Virginia's Student Activity Fund constituted a "limited public forum"[43] intended to "encourage a diversity of views from private speakers," but the NEA did not. The University had funded all speech except "religious editorial viewpoints" from its Student Activities Fund, into which every student paid a $14 mandatory fee each semester. By contrast, the NEA made only a limited number of grants through a "competitive process" according to principles of inherently content-based principles of "excellence" as well as "geographic, ethnic, and esthetic diversity." Thus, it was permissible, in principle, for the NEA to exclude "indecent" content.

The Supreme Court's decision in U.S. v. American Library Association, Inc. (2003) also suggests that content restrictions regarding Citizen News Vouchers would be struck down. The Court held that the First Amendment did not bar Congress from requiring in the Children's Internet Protection Act (CIPA) that "a public library may not receive federal assistance to provide Internet access unless it installs software to block images that constitute obscenity or child pornography, and to prevent minors from obtaining access to material that is harmful to them."[44] Critically, the Court held that libraries were not public fora:

A public library does not acquire Internet terminals in order to create a public forum for Web publishers to express themselves, any more than it collects books in order to provide a public forum for the authors of books to speak. It provides Internet access, not to "encourage a diversity of views from private speakers" ... but for the same reasons it offers other library resources: to facilitate research, learning, and recreational pursuits by furnishing materials of requisite and appropriate quality.[45]

But what is the purpose of the news voucher scheme if not to "encourage a diversity of views from private speakers?" Indeed, this is precisely how McChesney and Nichols attempt to sell their scheme--as a "libertarian's dream." But, paradoxically, the more "libertarian" and broader subsidies for speech are, the more likely the political/constitutional paradox mentioned above is to arise.

The Citizenship News Voucher Fund proposed by McChesney and Nichols strongly resembles the University of Virginia's Student Activity Fund: In both cases, consumers are taxed to finance a fund that is, in theory, available to any entity that meets certain basic eligibility criteria. No attempt is made in either case to ensure the quality of content or activities being funded. Indeed, McChesney and Nichols explicitly reject such oversight of voucher spending and insist that taxpayers must accept that much of the fund will simply be wasted on media that falls well short of the "hard" or "serious" news they're trying to save. (By contrast, the Corporation for Public Broadcasting, whose budget McChesney and Nichols propose increasing nine-fold to fund more public media,[46] more closely resembles the NEA as a selective grant-maker.)

Also distinguishing the Court's decision upholding CIPA's content-based restrictions is the fact that both Justice Kennedy in his concurrence and Justice Souter in his dissent (joined by Justice Ginsburg) agreed that First Amendment problems could be solved to the extent that adults could opt-out of filtering.[47] But with news vouchers, the government either restricts the eligibility of certain publications to receive vouchers depending on their eligibility or it does not.

Furthermore, unlike with CIPA or the NEA, the Citizenship News Voucher wouldn't be related to educational settings, so it's not even clear a "decency" requirement like that Congress imposed on the NEA's grant-making could be imposed on voucher eligibility.[48] Magazines like Playboy offer a mix of pornography and thoughtful commentary on the news, proving that there is a market for such combination of journalism and controversial entertainment and photography. Going even further, "Naked News" is a daily show whose buxom anchors strip while delivering the news.[49] Why wouldn't millions of Americans, especially younger men, use their voucher for such content? Who's going to draw the line between porn-spiced news and "serious" content?

The typical taxpayer will be outraged by having to subsidize somemedia outlet, whether because of its objectionable viewpoint or indecent or unserious content. He will fiercely resist being compelled "to furnish contributions of money for the propagation of opinions which he disbelieves and abhors," as Jefferson put it. Good luck getting even the most "tolerant" gay voters, for example, to accept being taxed to pay for fundamentalist Christian perspectives on the news--or vice versa! McChesney and Nichols don't actually say anything about the First Amendment, but do recognize that, for their program to be accepted, the American people will have to swallow the "hard pill" of accepting that "some of the vouchers are going to go to media that they detest" and "embrace dissent in reality and not just rhetoric."[50] They seem to think this "hard pill" is a benefit of their scheme because it would teach us all to be more tolerant of "dissent." That's easy for an endowed professor at a taxpayer-funded university and avowed neo-Marxist like Robert McChesney to say, but it's not likely to fly with most Americans. Disputes over "qualifying entity" eligibility will only add new rancor to the Culture Wars (over sex, abortion, religion, politics, etc.).

Realistically, it would likely take years for a news voucher bill to make its way through Congress, and if it ever did pass, it would likely be tied up in the courts for years, requiring at least one visit to the Supreme Court. If any content strings are included, the law could well lead to the same kind of ordeal as with the 1998 Child Online Protection Act, which spent nearly 9 years in litigation and went up to the Supreme Court twice.[51] Yet somehow McChesney and Nichols imagine their proposal will save media today at this critical moment of technological transition.

Down with Copyright, Down with Capitalism?

There's another problematic caveat to the McChesney-Nichols variant of the news voucher idea: They would disallow any copyright protection or advertising support for an entity who receives voucher funds. That's an effort by the authors to steer even more media activity away from the commercial sphere and toward what might be thought of as a "public option" for the press--what McChesney and Nichols euphemistically (and repeatedly) call "post-corporate" media.

Let's not forget that McChesney has argued (during an interview on the Canadian-based "Socialist Project") that "the ultimate goal is to get rid of the media capitalists," and that, "unless you make significant changes in the media, it will be vastly more difficult to have a revolution." So, it's important to keep his true intentions in mind when he starts claiming to have found "a libertarian's dream" of a solution to what ails America's media sector.[52] It sounds more like a central planner's dream. The true "libertarian's dream" would be to leave Americans free to make their own choices about media without additional meddling from the State, and to look to innovation to fund media through a combination of advertising, sponsorship, subscriptions and micropayments.

[3] "Until now, the iron core of news has been somewhat sheltered by an economic model that was able to provide extra resources beyond what readers--and advertisers--would financially support. This kind of news is expensive to produce, especially investigative reporting." Alex S. Jones, Losing the News: The Future of the News that Feeds Democracy (2009) at 4.

[4] "For a long time, publishers have used news as a 'loss leader,' a product sold below costs to create other sales." The Media Consortium, The Big Thaw: Charting a New Future for Journalism, July 2009, at 36, www.themediaconsortium.org/thebigthaw.

[5] James T. Hamilton notes that, "nonpartisan reporting emerged as a commercial product in American newspaper markets in the 1870s. Before that time, many papers openly proclaimed association with a particular political party." James T. Hamilton, All the News That's Fit to Sell (2004), at 3.

[9] Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 201-206. McChesney discussed this idea in more detail when he spoke at the recent FTC event on saving journalism. Robert W. McChesney, Rejuvenating American Journalism: Some Tentative Policy Proposals, Presentation to FTC Workshop on Journalism, March 10, 2010, www.ftc.gov/opp/workshops/news/mar9/docs/mcchesney.pdf

[15] They define choice architecture as follows: "A structure designed by a choice architect(s) to improve the quality of decisions made by homo sapiens. Often invisible, choice architecture is the specific user-friendly shape of an organization's policy or physical building when homo sapiens come into contact with it. Examples of choice architecture include a voter ballot, a procedure for handling well-meaning people who forget a deadline, or a skyscraper." Nudge Glossary of Terms, www.nudges.org/glossary.cfm.

[17] As Glen Whitman notes in challenging such "nudging": "the new paternalism carries a serious risk of expansion. Following its policy recommendations places us on a slippery slope from soft paternalism to hard. This would be true even if policymakers -- including legislators, judges, bureaucrats, and voters -- were completely rational. But the danger is especially great if policymakers exhibit the same cognitive biases attributed to the people they're trying to help." Glen Whitman, The Rise of the New Paternalism, Cato Unbound, April 5, 2010, www.cato-unbound.org/2010/04/05/glen-whitman/the-rise-of-the-new-paternalism.

[22] For example, among other things, McChesney and Nichols call for a 5% tax on consumer electronics, a 3% tax on monthly ISP & cell phone bills, a 2% sales tax on advertising, and a 7% tax on broadcasters. See McChesney & Nichols, supra note 9 at 209-11.

[47] "If, on the request of an adult user, a librarian will unblock filtered material or disable the Internet software filter without significant delay, there is little to this case." American Library Association, 539 U.S. at 214 (Kennedy, J. concurring). Justice Souter agreed that it would ''tak[e] the curse off the statute for all practical purposes'' if adult patrons could obtain an unblocked Internet terminal ''simply for the asking,'' but doubted this would actually happen in practice. Id. at 232.

[48]Cf. Rosenberger, 515 U.S. at 584 ("Educational programs are central to the NEA's mission.... And it is well established that 'decency' is a permissible factor where 'educational suitability' motivates its consideration.").